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Before the Bell: Stocks set to rally as Yellen soothes nerves

The Before the Bell report is compiled by editors of The Globe and Mail and is updated throughout the morning to reflect latest developments. Colin Cieszynski, Chartered Financial Analyst and Chartered Market Technician, is chief market strategist with CMC Markets.

The rally in stock markets picked up pace overnight, with overseas equities posting significant gains, including 2.1 per cent for the Hang Seng in Hong Kong and a rise of more than 1.5 per cent for both London's FTSE and Germany's Dax. The rally has followed through into U.S. trading this morning, with index futures for the Dow and S&P 500 trading up about 0.6 per cent. TSX 60 futures are up about 0.7 per cent, also indicating a solid start to trading.

Ending a few days of sluggishness, stocks rose decisively Tuesday following a speech from Federal Reserve Chair Janet Yellen, who set the record straight on where the U.S. central bank stands on interest rates following recent contention between duelling factions at the Fed.

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Ms. Yellen came out clearly on the dovish side, confirming a slower pace of interest rate increases are planned due to global economic and financial market volatility. She dropped the reference she had previously made to April being seriously considered for a rate hike, suggesting the two hikes currently forecast for this year may come in June and December.

She also make comments related to recent rises in core PCE inflation being normal fluctuations rather than the start of a trend, and also that she thinks the current neutral rate for Fed Funds (neither expansionary nor contractionary) is currently near zero but can rise if inflation picks up. These comments can also be seen as dovish, indicating that she doesn't think the Fed is falling behind the inflation curve and therefore isn't in a hurry to raise interest rates in April.

In addition to igniting the currency rally in stocks, her comments sent the U.S. dollar down sharply. The Canadian dollar started out strong Tuesday, but has been backsliding this morning.

Crude oil has been on the rebound overnight, clawing back some of Tuesday's losses in tandem with other markets. American Petroleum Institute crude inventories on Tuesday didn't go up as much as last week, so we could see more activity around today's Department of Energy inventory reports.

Speeches from Chicago Fed President Charles Evans today and New York Fed President William Dudley Thursday may reinforce the dovish case, with the next comments from the hawkish faction not scheduled until Cleveland Fed President Loretta Mester speaks on Friday.

Lululemon shares may attract attention today after the yoga and athletic clothing company reported earnings per share of 85 cents for its latest quarter, above the 80 cents the Street had been expecting, with same-store sales rising by 5 per cent. Shares are up more than 4 per cent in the U.S. premarket.

Meanwhile, strong sales and earnings at Dollarama along with a dividend increase and management change have shares of that retailer rising nearly 5 per cent in the U.S. premarket. This result can also be seen as a sign of the times, as discount stores are countercyclical in some ways. This suggests that some regions of the country (particularly those dependent on oil and gas exploration and production) have been hit really hard and are in recession while Canada continues to work at rebalancing its economy.

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Now, here is a closer look at key market data, and corporate and economic news.

MARKET DATA:

Futures

Dow +0.55 per cent; S&P 500 +0.59 per cent; Nasdaq: +0.72 per cent; TSX 60 +0.7 per cent

Equities
Hong Kong's Hang Seng +2.15 per cent
Shanghai composite index +2.76 per cent
Japan's Nikkei 225 -1.31 per cent
Germany's DAX +1.70 per cent
London's FTSE +1.63 per cent
France's CAC 40 +1.86 per cent

Commodities
WTI crude oil (Nymex May) +1.67 per cent at $38.92 (U.S.) a barrel
Gold (Comex June) -0.16 per cent  at $1,235.50 (U.S.) an ounce
Copper (Comex May) -0.72 per cent at $2.198 (U.S.) a pound

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Currencies

Canadian dollar +0.0018 at 76.73 cents (U.S.)
U.S. dollar index -0.250 at 94.910

Bonds
U.S. 10-year Treasury yield +0.01 at 1.82 per cent

KEY ECONOMIC RELEASES

U.S. ADP private-sector national employment report for March. Some 200,000 net jobs were added, a little better than the consensus call of 195,000, but down from February's gain of 214,000.

KEY CORPORATE NEWS

Canadian yoga-wear retailer Lululemon Athletica Inc reported a higher-than-expected quarterly profit, helped by strong sales during the holiday shopping period. The company reported earnings of 85 cents per share for the fourth quarter ended Jan. 31, beating analysts' average estimate of 80 cents, according to Thomson Reuters I/B/E/S. Lululemon forecast higher net revenue in the range of $2.29 billion-$2.34 billion for the full year ahead.

Dollarama reported fourth-quarter EPS of $1 vs. expectations of 93 cents. Revenue beat expectations as well. It boosted its dividend by 11 per cent.

Valeant Pharmaceuticals International Inc. is seeking an agreement with its lenders to extend the deadline for filing its annual report. The Laval, Que.-based drug giant said on Wednesday it wants to stretch the deadline for the filing the report to May 31 just in case it is not able to meet an April 29 reporting date.

State Street Corp said it would buy General Electric Co's asset management business for up to $485 million as the industrial conglomerate winds down its financing arm to reduce regulatory burden.

Other earnings today include: China Gold International Resources Corp Ltd.; Claude Resources Inc.; Micron Technology Inc.; ProMetic Life Sciences Inc.; Torex Gold Resources Inc.

Also see: Wednesday's small-cap stocks to watch

With files from wire services

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